Gasoline’s crack, a measure of refining profit, fell to the lowest in almost five months in Europe as domestic demand declined and supplies surged in the US, the continent’s main export market.

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By PRIYANKA SHARMA and LANANH NGUYEN

Bloomberg

Gasolines crack, a measure of refining profit, fell to the
lowest in almost five months in Europe as domestic demand
declined and supplies surged in the US, the continents
main export market.

The crack, or premium to Brent crude, fell 3 cents to
$8.54/bbl, according to data from PVM Oil Associates Ltd., a
broker in London. Thats the least since Feb. 28 and is
down 36% this month. Gasoline supplies in northwest Europe
are the highest for this time of year since 2010, while US
supplies climbed to the most in four months.

Demand in Europe is lackluster, said Steve
Sawyer, an analyst at FGE, an energy consultancy, by phone
from London on July 25. Europe relies on demand in the US,
which is starting to wane.

Europe consumed 1.92 million bpd of gasoline in April, the
most recent month available in data from the International
Energy Agency. Thats down 30,000 bpd from the previous
year and 3.5% lower than the average in 2012, data from the
Paris-based adviser to 29 nations show.

Gasoline stockpiles held in independent storage at the
Amsterdam-Rotterdam-Antwerp oil hub rose 5.3% to 873,000
metric tons in the week to July 24, according to data from
PJK International BV, a researcher in the Netherlands.

Europe typically sells its surplus
gasoline to the US, where refiners have boosted domestic fuel
production amid rising crude output from shale deposits.
Thats reduced the nations need for imports,
exacerbating the oversupply in Europe.

US refineries are running at peak utilization,
Ehsan Ul-Haq, senior market consultant at KBC Energy
Economics, said by phone on July 25 from Walton-on-Thames,
England. So the US produces more than enough gasoline
and doesnt need too much from Europe any more.

Refinery utilization in the US has
been stable at 93.8% since July 11, the highest level since
2005, according to US Energy Information Administration data.

The crack will weaken further, Sawyer said. Ample
supplies will cause US prices to drop, diminishing the profit
for European refiners who intend to
shiptransatlantic cargoes of gasoline, Sawyer said.

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